Highlights
For the blockchain ecosystem to flourish, its integrity must be protected. By upholding the integrity of the ecosystem, industry participants can boost user trust and thus foster growth.
In line with this vision, at Binance we have cultivated a user-centric culture that defines everything we do. We put this into practice by helping users recover misplaced and lost digital funds wherever possible, as well as freezing and recovering ill-gotten funds that arrive on our platform.
Defending against malicious actors requires coordination of multiple parties across the ecosystem. In this area, the Binance Security team froze and recovered an estimated $55 million in user funds throughout 2023.
The rise of digital assets marked an unprecedented change in the way people organize their financial activity. With any paradigm shift, especially one involving new technologies, trust becomes a key resource to ensure progress and adoption. At such critical times, burgeoning new ecosystems and industries are vulnerable to malicious actors seeking to take advantage of their emergence. Early in the history of digital finance, we witnessed some infamous cases of cryptocurrency frauds which, in turn, led to misperceptions that cryptocurrencies were primarily used for crime.
In order to foster the growth of the ecosystem even in its initial period, industry leaders like Binance must use their reach and resources to support other participants in the emerging market. In this way, they can protect users and maintain the integrity of the space. From the beginning, we at Binance have been dedicated to shouldering this responsibility, which is an important part of our vision to always put users first. It remains our duty to prioritize the community and maintain the integrity of the ecosystem.
How to foster a vibrant ecosystem
The integrity of the ecosystem is what ensures that users are protected while interacting with the world of digital assets. Maintaining the integrity of an ecosystem is protecting the members that inhabit it and, therefore, supporting its growth. With the right tools and techniques, a leader like Binance can play a key role in this process by protecting users from malicious attacks on the ecosystem and mitigating the impacts of such events if they occur.
While Binance hosts its own series of platforms, products and services, this is only a small part of the global digital asset community. From the protocols that form the infrastructure layer to the users, developers and intermediaries that inhabit it, various entities coexist to make up the global blockchain ecosystem.
In our early days, we faced criticism for trying to protect the integrity of the ecosystem by protecting users and recovering their funds. Detractors generally favored a “less interventionist” approach, one that accommodated the decentralized nature of blockchain technology and code-based foundations. In a decentralized, permissionless network, rather than any central entity, it is the code that governs the flow of funds and information. When a centralized exchange like Binance takes responsibility for recovering lost funds or working to overcome the negative effects of security flaws, their actions are sometimes seen as going against the law of the underlying code. However, when code fails, leaders in the space must step up to protect it.
Despite criticism, we are user-centric, making us one of the first exchanges to establish preventive user protection measures against scams, hacks and rug pulls (liquidity theft), as well as proactive recovery work after of such incidents. We were also one of the first to actively collaborate with authorities around the world to combat cryptocurrency-related crimes. Trust and support from the community, both on and off our platform, have always fueled our success. In turn, we continue to nourish the ecosystem to foster this harmonious cycle of growth.
We help people
Navigating the world of cryptocurrencies can sometimes be overwhelming, especially at first. Sometimes transactions don't go as planned or coins disappear. This is where the potential lies for maintaining the integrity of the ecosystem: protecting and recovering the assets of individual users. As many in the industry know, the immutable nature of blockchain can make it difficult to recover funds. Tokens sent to the wrong address are usually lost once the transaction is completed.
However, the Binance Customer Support team offers a wide range of coin recovery services for a variety of potential issues. These are spread across several cases, from tokens not being credited due to network issues, blockchain updates, or wallet maintenance to incorrect wallet deposits, unlisted tokens, or unsupported networks. They also handle recovery issues related to delisted tokens, deleted accounts, regulatory restrictions, erroneously deposited coins, and even lost NFTs.
Mistakes happen, but our Customer Service agents are there to help rectify them and make the process safer and easier. Throughout 2022 and 2023, the team has successfully handled 381,616 appeals, recovering approximately $4.35 billion in cryptocurrency that was deposited but not credited for various reasons, and refunding it to our users. Their efforts help create a safe trading environment, even for novice cryptocurrency users, contributing to the integrity and robustness of the overall ecosystem.
Users are the foundation of the ecosystem, and user trust is the most important resource that fuels our innovative space. Fortunately, the Binance Customer Support team is here to create a friendly and safe environment for them.
collective defense
Contrary to some popular misconceptions, only a small portion of cryptocurrencies are used in crime-related transactions. According to Chainalysis' 2024 crime report, illegal cryptocurrency transactions in 2023 only accounted for 0.34% of total on-chain transaction volume, down from 0.42% in 2022. Still, when cryptocurrency crime occurs, the global blockchain ecosystem comes together to combat it.
The Binance Security team collaborates with various partners, including other exchanges, services, blockchain analysis companies, user communities, and more. Freezing as much stolen funds as possible is often a struggle, especially when dealing with established criminal organizations. These are collective defense initiatives that play a crucial role in the security of the ecosystem. Contributing to these efforts, the Binance Security team helped freeze and recover over $55 million in user funds throughout 2023.
Stand up to scammers
rug pulls are a type of scam in which developers attract investors to their seemingly lucrative project, then suddenly abandon it and sell or withdraw all their liquidity. Rug pulls are often associated with decentralized finance (DeFi) projects and decentralized exchanges (DEX). While the decentralized and public nature of these spaces allows community innovation to flourish, it can also make policing and security difficult.
On October 13, 2020, a DeFi project called WineSwap experienced a rug pull less than an hour after its launch. Its founders stole an estimated $345,000 in user funds. The Binance Security team traced the flow of funds through various blockchains to the exchanges, where the funds were eventually frozen. The next day, the team identified the suspect as a Binance user, who quickly agreed to cooperate in returning the funds to the victims. Ultimately, with the help of various parties across the ecosystem, we were able to return 99.9% of the stolen funds to their rightful owners.
Another major rug pull occurred on March 4, 2021, when the Meerkat Finance DeFi project disappeared a day after its launch. The scammers emptied investors' accounts of approximately $31.5 million in tokens. After the BNB Chain community got in touch, Binance traced the stolen assets to various addresses. The incident was reported by the community and the Binance Security team inspected the scammer's activities to successfully identify a suspect. By the end of the day, over 95% of the stolen funds were recovered, a feat that marked Binance's largest fund recovery at the time.
More recently, in May 2023, a project called XIRTAM initiated a rug pull, stealing an estimated $3.3 million worth of ETH from investors and then depositing the funds into a Binance account. Our Security team immediately froze the funds to prevent scammers from accessing them. The team then analyzed project activities to identify victims, calculate losses, and make reimbursements available at more than 1,750 addresses. By September 2023, we have successfully returned an estimated $2.3 million to victims, and the process is still ongoing.
How to fight hackers
Hackers exploit vulnerabilities in blockchains or associated platforms, such as wallets or exchanges, to illegally access funds and data. In these types of cases, Binance and other industry partners must act quickly to ensure that these attackers do not get away with it. It is a coordinated defense throughout the ecosystem.
In June 2022, Harmony's Horizon Bridge was hacked. The attackers stole around $100 million in cryptocurrency. The attack was attributed to Lazarus, a North Korean cybercrime group. Binance's Security team subsequently helped trace and freeze more than $8.5 million of the stolen funds.
Another hack attributed to Lazarus occurred a year later, in June 2023, when a vulnerability attack impacted the non-custodial platform Atomic Wallet. An estimated 5,500 user wallets were compromised, leading to more than $100 million in stolen funds. The Binance Security team helped track and freeze these funds as they reached Binance accounts and other exchanges we alerted. In total, we were able to freeze approximately $1.3 million in user funds.
Ultimately, these defensive works demonstrate the power of collective action, with a multitude of moving parts coming together to secure the whole. This harmonious complexity characterizes the global blockchain ecosystem and serving it remains our duty.
The future of integrity
Binance has always been characterized by its dedication to users. From day one, users have been our top priority and it was this commitment that got us to where we are now. Each of these cases highlights how we defend the integrity of the ecosystem, both independently and collectively with other participants in the space. This would be impossible without our and our partners' shared mission to serve the ecosystem.
As we move into the next phase of global adoption, ecosystem integrity will become an even greater priority. Binance's culture, with a strong focus on users, will continue to guide us as we surpass industry standards to support the ecosystem. When integrity is assured, growth and development can flourish.
